3rd UPDATE:UC Rusal: Upgrades Cuts To Reduce Aluminum Output By 4%

High aluminum production costs are eating further into producer margins, forcing Russia's largest smelting company to up its cuts to 4% and to wipe nearly 9% of global annual alumina output, it told Dow Jones Newswires Monday.

In a move being replicated by other smelters worldwide, United Company Rusal is cutting around 180,000 metric tons a year of aluminum production and reducing its annual output of alumina, the raw ingredient used to make aluminum, by 970, 000 tons.

It will also delay the start-up of its Taishet smelter by around a year, a 750,000-ton-a-year greenfield aluminum smelter in a small town near Irkutsk. The smelter had been slated to start producing in 2011.

Slumping demand for aluminum in the deteriorating economic environment has led to a collapse in the price of the metal, used in automotives and aerospace.

Because it takes two tons of alumina to make one ton of aluminum metal, Rusal is also acting to cut production of this key raw material. Operations in Sardinia and Jamaica will be the casualties of the alumina cuts, with 550,000 tons and 420,000 tons of annual output to go respectively.

This isn't the first cut for Rusal, which accounts for almost 12% of global aluminum production and 15% of world alumina output. Last week, it announced cuts at its Bogoslovsk and Ural smelters, and in November suspended output at its Zaporozhye Alumina and Aluminium Complex in Ukraine due to market conditions and in an attempt to cut costs.

With around 90% of the world's aluminum smelting capacity estimated to be making losses at current prices, companies are looking at ways to save cash.

U.S. Alcoa Inc. (AA) was the first major western producer to make cuts in line with falling demand and has so far removed some 615,000 tons a year, or 15% of its annualized output, from its global smelting system.

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